Asset managers dodge 'systemic risk' regulatory bullet

Asset managers have dodged a regulatory bullet following a decision by US authorities’ that they do not pose a ‘systemic risk’ to the global financial system.

The Financial Stability Oversight Council, administered by the US Treasury said it would continue to keep the sector under review but that the area would not be a primary focus of its risk analysis.

The designation would have bought the largest global investment businesses such as BlackRock and Fidelity under much closer federal oversight, in a similar manner to the global banks.

The FSOC’s chief executive Larry Fink has previously warned that leveraged ETFs pose a ‘structural problem which could blow up the whole industry’.

‘The council directed staff to undertake a more focused analysis of industry-wide products and activities to assess potential risks associated with the asset management industry,’ the FSOC said in a statement.

The council also said that it was continuing to monitor the Securities and Exchange Commission-mandated reform of the money-market mutual fund sector and said it was assessing whether some provisions, such as redemption gates and liquidity fees, might exacerbate risks.

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